Consumers supported domestic products and domestic brands enjoyed strong growth
In August 2020, the Swiss Good Cotton Development Association (BCI) announced that it would cancel the guarantee certification indefinitely for all cotton companies in Xinjiang, which is equivalent to Xinjiang's cotton products being blacklisted in international trade, CCTV News reported.
The "Xinjiang Cotton" incident gave domestic brands an opportunity to "overtake at the corner", and the opportunity did not live up to it.
Li Ning said in a statement late on June 25 that it expected net profit for the first half of 2021 to be no less than 1.8 billion yuan, up from 683 million yuan in the same period last year. In other words, Li Ning's first-half performance increased by more than 164% year on year.
In response, Li Ning said the improvement was mainly due to revenue growth of more than 60 percent and continued improvement in operating margins.
Anta Sports' performance is also not to be underestimated. According to a previously released announcement, the operating profit of Anta Sports in the first half of 2021 is expected to increase by no less than 55 percent year on year, to about 5.58 billion yuan.
In the announcement, Anta Sports said that by mid-2021, the impact of the epidemic on the Chinese mainland's retail market had declined relatively significantly, and the earnings of its brands had recorded a strong rebound.
In addition to Li Ning and Anta Sports, Xtep International, Taiping Bird and other domestic brands have not disclosed the first half of this year's performance forecast, but from the first quarter of the performance data, their performance is very bright.
Among them, Xtep International's main brand, Xtep's retail sales in mainland China rose about 55 per cent in the first quarter from a year earlier. Taiping Bird's revenue in the first quarter rose 93.10% year-on-year to 2.670 billion yuan, and the net profit attributable to shareholders of the listed company was 203 million yuan, up 2222.25% year-on-year.
"618" sales data based on brand recognition, the share prices of many domestic brands soared
Through the analysis of the sales data of the June 18 shopping festival, it can be seen that consumers' recognition of different brands has changed.
According to Zhongtai Securities Research, Chinese sports brands saw a high growth in sales during the June 18 shopping festival, Tmall's official flagship store. Among them, China Li Ning flagship store, Li Ning official online store, Desante, FILA, Anta, Xtep respectively increased by 164%, 39%, 150%, 69%, 59% and 41%.
Zhongtai Securities believes that this may be related to the change in consumer recognition of overseas brands after the Xinjiang cotton incident, and the promotion of national brand awareness.
The high sales figures have been matched by the impressive share price performance of the listed companies with domestic brands.
On June 25, shares of listed companies such as Li Ning, Anta Sports, Xtep International and Taiping Bird rose about 77%, 55%, 201% and 22%, respectively, according to Red Star Capital Bureau.
At their June 25 closing prices, all of the companies hit their highest levels since 2021, with their latest market capitalisations at HK $206 billion, HK $486.3 billion, HK $35 billion and HK $23.7 billion, respectively.
Since the March 25 rally, their combined market value has increased by about 290 billion Hong Kong dollars, or about $1.45 billion.
Institution point of view: the trend of domestic brands replacing overseas brands is still in place
Zheshang Securities pointed out in the research report, in 2020, Nike, Adidas, Skechers three groups in China retail sales have reached 150 billion magnitude, and Anta, Li Ning, Xtep three groups of main brand water in 65 billion magnitude.
"We believe that if there is a long-term decline of 10% to 20% of overseas brands, the marginal improvement in the pattern of Chinese brands will be very obvious." Zheshang Securities said that if such a situation occurs, the water space brought to domestic brands is at the level of 20-30 billion/year.
Zheshang Securities stressed that in the end of the storm in the past nearly three months, the domestic brand terminal water instead of overseas brands trend is still in.
Other brokerages point out that the era of "domestic brands replacing foreign ones" has already begun, only accelerated by the Xinjiang cotton scandal in late March.
Sinolink securities that are completed with the head and homebred brand product, brand, operating efficiency upgrading or extension of mergers and acquisitions, in the case of industry concentration is high, the future of the industry competition will be homebred brand by upgrading, cultivating a new brand, with international brands in the high-end market share, formed "domestic substitution".
"The Xinjiang cotton outbreak in March has effectively accelerated this process," Sinolfin Securities said in a research note.
Source: Hua Xian Tou Tiao
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